Waldencast plc Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Michel Brousset highlighted the resilience of the beauty market, the Waldencast Flywheel Effect for growth and profitability, and the strong performances of Milk Makeup and Obagi Medical within their respective categories.
• Manuel Manfredi reviewed fourth quarter and fiscal year 2024 financial results, noting net revenue growth, adjusted gross profit and EBITDA improvements, strong cash conversion, and updated financial position including a new credit facility.

Segment Performance

• Milk Makeup: Fourth quarter net revenue was $29.9 million, a 31.9% increase; fiscal year net revenue was $124.6 million, a 24% increase from 2023. Adjusted gross profit margin in Q4 was 64.9%, up 180 basis points from the prior year; fiscal year adjusted gross profit margin was 68.2%, a 180 basis point expansion. Adjusted EBITDA in Q4 was $4.8 million, up from $1.4 million in Q4 2023; fiscal year adjusted EBITDA was $29.1 million, a 58% increase from 2023.
• Obagi Medical: Fourth quarter net revenue was $42.2 million, a 27.7% comparable growth; fiscal year net revenue was $149.3 million, a 30.7% comparable growth from 2023. Adjusted gross profit in Q4 was $33.2 million, with adjusted gross margin contracting 130 basis points to 78.7%; fiscal year adjusted gross profit was $118.6 million, with adjusted gross margin at 39.4% of net revenue. Adjusted EBITDA in Q4 was $9.8 million, a 23.7% increase from Q4 2023; fiscal year adjusted EBITDA was $30.5 million, a 46.4% increase from 2023.

Guidance

• Anticipate net revenue growth in the mid-teens for full year 2025.
• Expect adjusted EBITDA margin to further expand into the mid to high teens.
• Q1 net revenue expected to be relatively flat due to Jelly launch anniversary and retail inventory adjustments, with growth accelerating sequentially thereafter due to innovation and distribution expansion.

Risks

• Ongoing regulatory investigation affecting cash generation, with expectation of increased cash generation once the matter concludes.

Q: Alec Legg asked about the guide for the year, specifically Q1 flatness and acceleration, and quantification of Jelly's boost in Q1 and Ulta's benefit in Q4.

A: Michel Brousset responded that Q1 flatness is due to Jelly anniversary and retail inventory adjustments, with strong acceleration expected due to innovations like Skin Tint and Ulta launch. Quantification details were not disclosed for competitive reasons.

Q: Jonna Kim inquired about marketing investment allocation and physician dispense channel resilience.

A: Michel Brousset said marketing investment will continue to accelerate, with Milk Makeup expanding marketing to new consumers and Obagi Medical advertising directly to consumers. The physician dispense channel is normalizing but remains strong with premiumization and beauty/aesthetics wellness trends.

Q: Ashley Helgans asked about macro environment impact and initial takeaways on Milk's Ulta launch.

A: Michel Brousset noted beauty consumer resilience despite macro changes, with Milk's Ulta launch performing strongly, driven by Skin Tint and jelly skincare innovations, and expecting incremental growth with some cannibalization between Ulta and Sephora.

Q: Linda Bolton Weiser asked about Milk's Skin Tint and skincare launches and Ulta expansion potential.

A: Michel Brousset explained there are Skin Tint and jelly skincare launches, both shelved on same fixtures in Ulta and Sephora. Ulta expansion has potential but focuses on productivity per store, and Milk is not in Ulta at Target.

Q: Olivia Tong asked about Milk's Ulta launch impact on Sephora space and Q1 outlook adjustment.

A: Michel Brousset stated Milk is not losing space at Sephora for Ulta launch. Q1 outlook flatness is due to Jelly anniversary and retail adjustments, with confidence in acceleration throughout the year as innovations and distribution expand.